African Rainbow Minerals (JSE:ARI) Has Rewarded Shareholders With An Exceptional 468% Total Return On Their Investment

January 29, 2021
  •  Updated
August 20, 2022
JSE:ARI
Source: Shutterstock

For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the African Rainbow Minerals Limited (JSE:ARI) share price has soared 300% over five years. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 21% gain in the last three months. But this could be related to the strong market, which is up 18% in the last three months.

See our latest analysis for African Rainbow Minerals

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, African Rainbow Minerals managed to grow its earnings per share at 112% a year. The EPS growth is more impressive than the yearly share price gain of 32% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
JSE:ARI Earnings Per Share Growth January 30th 2021

It is of course excellent to see how African Rainbow Minerals has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at African Rainbow Minerals' financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of African Rainbow Minerals, it has a TSR of 468% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that African Rainbow Minerals shareholders have received a total shareholder return of 78% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 42% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for African Rainbow Minerals you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on ZA exchanges.

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About JSE:ARI

African Rainbow Minerals

African Rainbow Minerals Limited, through its subsidiaries, operates as a diversified mining and minerals company in South Africa and Malaysia.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation5
Future Growth5
Past Performance6
Financial Health6
Dividends5

Read more about these checks in the individual report sections or in our analysis model.

Outstanding track record with flawless balance sheet and pays a dividend.